The Bangko Sentral ng Pilipinas (BSP) is ready to utilize the full force of available measures after the US Federal Reserve delivered a 75-basis points increase in interest rates to help tame persistent inflation.
BSP Governor Felipe Medalla said the action of the US Fed, along with the tightening of global financial conditions and broadening uncertainty over global growth prospects, could continue to drive exchange rate movements in emerging market economies, including in the Philippines.
“In order to manage the spillover effects of such external developments, the BSP is prepared to utilize the full force of available measures in order to address the potential risks to Philippine inflation and inflation expectations arising from an overshooting or excessive depreciation of the Philippine peso,” Medalla said.
The Monetary Board has so far raised key policy rates by 125 basis points since May, bringing the overnight reverse repurchase rate to 3.25 percent from a record low of two percent.
The BSP chief has signaled another 25 to 50 basis points increase on August 18 after delivering a jumbo 75 basis points hike in a surprise off-cycle meeting last July 14.
Inflation in the country averaged 4.4 percent from January to June and continues to exceed the central bank’s two to four percent target range due to rising oil prices, elevated food prices, and weak peso due primarily to supply disruptions as well as the impact of the Russia-Ukraine war.
“At the same time, the BSP will continue to be guided by its assessment of the domestic and global developments that affect the outlook for inflation and growth,” Medalla added.
Looking ahead, the BSP stands ready to take all necessary monetary policy action to bring inflation back toward a target-consistent path over the medium term.
Further monetary policy adjustment will be carried out in the coming months commensurate with the primary objective of preventing inflation from becoming further entrenched. The BSP believes the Philippines’ robust economic prospects continue to provide enough room for further tightening of the monetary policy stance. As always, the BSP’s future monetary policy decisions will remain guided by data outcomes for the Philippine economy.